Music sales up for the first time since 1999

Revenue driven by increasing digital sales and paid subscriptions

Financial trends and news by Steven Loeb
February 26, 2013
Short URL: http://vator.tv/n/2dc3

For the first time in over a decade, the music industry actually saw its revenues go up last year. And, of course, digital music if fueling that growth.

Music sales rose 0.3% in 2012,, the first time they were up since 1999, according to a new report from IFPI Tuesday. Total global revenue is now $16.5 billion total, with $5.6 billion, of 34%, coming from digital channels, including downloads, subscription and advertising. 

Overall digital download sales increased by 12% around the world last year, and account for around 70% of digital music revenues, while subscription services also drove digital revenue up, as the number of people paying or one increased by 44% to 20 million. They are are expected to account for over 10% of digital revenue last year.

To put it perspective, in January 2011 the major international download and subscription services were present in only 23 markets. Today, they are in more than 100.  In fact, Digital channels npw account for the majority of record companies' income in an increasing number of markets including India, Norway, Sweden and the U.S. 

People are also incredibly satisfied with their music service, with 77% rating them as excellent, very good or fairly good. Even 57% of those who use unlicensed services believe "there are good services available for legally accessing digital music."

"It is hard to remember a year for the recording industry that has begun with such a palpable buzz in the air. These are hard-won successes for an industry that has innovated, battled and transformed itself over a decade. They show how the music industry has adapted to the internet world, learned how to meet the needs of consumers and monetised the digital marketplace," Frances Moore, chief executive of IFPI, said in a statement.

This is not to say that all revenue is being driven by digital channels. Many non-digital revenue channels are increasing as well, including performance rights.

Income from performing right increased by 9.2% in 2012, and now accounts for around 6% of overall industry revenues, up from 3% in 2007.

Barriers to increased revenue

And there are, of course, some barriers in the way, including pirate websites that are aided by advertising, search engines and Interet service providers.

Advertising funds pirate sites that sell music illegally, and brands should remove their ads from those sites, the report says, while search engines still drive people to those sites. Though Google pledged to take steps to stop this from happening, their actions have not had any impact so far.

ISPs can also block these illegal services, and when they do, traffic on them falls considerably. In countries where they are not blocked, traffic to illegal sites continues to grow.

"Our markets remain rigged by illegal free music. This is a problem where governments have a critical role to play, in particular by requiring more cooperation from advertisers, search engines, ISPs and other intermediaries. These companies' activities have a decisive influence in shaping a legitimate digital music business," Moore said.

(Image source: http://www.metalinsider.net)